Martin Wolf has an excellent story today in the Financial Times, “Unfettered finance is fast reshaping the global economy,” in which he describes the change from “managerial capitalism” to “global financial capitalism.” Wolf takes pains to avoid taking sides on whether this development is a good thing or a bad thing, but one senses that […]
Read more...Steve Rattner, best known as the heir apparent at Lazard Freres who overplayed his hand, and is now the head of a private equity firm, Quadrangle Partners, wrote a rather curious piece, “The Coming Credit Meltdown,” that ran in Monday’s Wall Street Journal (apologies for being on the late side in posting it). The odd […]
Read more...I know we are in the midst of a classic pattern, but it is still mystifying to watch it operate. At the end of a cycle, bonds start to decline in price before the equity market starts to fall. One would think that this sequence was sufficiently well established that the time lag between the […]
Read more...An article, “Better Deeds,” by Doug Smith at Slate tells us that, contrary to popular opinion, one group of subprime mortgage lenders has done well with the product and is experiencing default rates comparable to that of prime mortgages. And no, they aren’t seeing rising arrearages either (generally speaking, mortgage defaults and foreclosures track the […]
Read more...We have mentioned before that the CDO market, a dark, murky, but rapidly growing part of the financial markets, is looking dodgier by the day. A brief primer: CDOs resemble other structured credits, like mortgage backed securities, in that they are structured into tranches of varying credit quality and maturities. The top tier is often […]
Read more...When the story broke of trouble at a Bear Stearns hedge fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, that led it to auction $4 billion of its holdings to raise cash, we speculated that this might wind up being the beginning of a liquidation. That scenario now appears likely. The Wall Street Journal […]
Read more...Many moons ago, we lamented, “Where Has the (Perception of) Risk Gone?” Even though the markets got religion for a couple of weeks after the global downdraft of February 27, things returned surprisingly quickly to status quo ante. Over the last week and a half, we seem to have had a mini rerun of February […]
Read more...The US has spent considerable time and energy hectoring the Chinese about the artificially low value of its currency (although there is considerable disagreement among experts as to how undervalued it really is). The notion that the currency is the chief culprit has become so fixed in the public imagination that Congress is determined to […]
Read more...Readers may recall that a Bear Stearns hedge fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, scheduled an auction for $4 billion of mortgage securities to raise cash. That’s a pretty unusual move, a sign of acute distress. Although Bear Stearns officials initially denied that the big sale was to meet margin calls, we […]
Read more...The funny thing about the oft-repeated George Santayana saying, “Those who cannot remember the past are condemned to repeat it,” is that it is generally applied to historical events, like the folly of launching an attack on Russia that might extend into the winter. But these days, in the financial markets, with so many people […]
Read more...This story, which describes the in extremis sale of $4 billion of bonds by a Bear Stearns hedge fund, “Bear’s Fund Is Facing Mortgage Losses,” is currently the lead story on the Wall Street Journal’s website, so it is likely to get page one coverage in the print edition. The fund, the High-Grade Structured Credit […]
Read more...Bill Gross, storied bond investor and head of PIMCO, a fund manager with nearly $700 billion under management, made an important observation in a Financial Times comment, namely, that interest rate policy is having a very different impact on businesses and consumers. While the two groups were (most of the time) similarly affected, now interest […]
Read more...This Bloomberg story cites Federal Reserve research efforts that found that blacks and Hispanics were more likely to wind up with costly mortgages than whites. Even though this work is three years old and strong enough that FDIC chairman Shiela Blair says she is troubled by the data, no regulator has yet to take action. […]
Read more...We are a tad late on this story on rising foreclosures, “U.S. Mortgage Foreclosure Filings Rise 90% in May,” which ran in yesterday’s Bloomberg, but then again, at least as of this hour, the Wall Street Journal has failed to take note of it. Keep in mind that the source of the data, RealtyTrac, uses […]
Read more...Martin Wolf, in a Financial Times comment, “Villains and victims of global capital flows,” looks at the two competing theories of the causes of global imbalances. One is the savings glut story, in which parsimonious Chinese and Japanese force the US to consume to keep the world from falling into recession. This view is favored […]
Read more...